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Dáil Éireann debate -
Tuesday, 2 Jul 1991

Vol. 410 No. 2

Private Members' Business. - Motor Insurance: Motion.

I move:

"That Dáil Éireann deplores the cost of car insurance, particularly for young drivers, and asks the Government to adopt the Fine Gael proposals, namely to encourage better driving skills, safer roads, stricter enforcement, tighter costs control on claims and a better deal from insurance companies."

With your permission, a Cheann Comhairle, I propose to share my time with my colleagues, Deputies Hogan and Lowry.

Is that agreed? Agreed.

Whenever the question of insurance is mentioned, the discussion quickly turns to motor insurance and particularly to the question of insurance for young drivers. It is in this context I commend to the House the Fine Gael motion in my name and that of my colleague, Deputies Michael Lowry and Philip Hogan:

That Dáil Éireann deplores the cost of car insurance, particularly for young drivers, and asks the Government to adopt the Fine Gael proposals, namely to encourage better driving skills, safer roads, stricter enforcement, tighter costs control or claims and a better deal from insurance companies.

In order to fully appreciate the situation we must have regard to the fact that young drivers find it almost impossible to obtain motor insurance cover, and the many who succeed have to meet premiums ranging from £2,000 to £3,000 and sometimes even more. This leads to a tendency to drive without insurance cover in some cases, and in other cases young people have become unemployed because of their inability to drive to work due to prohibitively high motor insurance premiums. These are not isolated instances. In fact, numerous cases have been brought to our attention where young people who had obtained employment and as a consequence had to drive to work or had to drive in the course of their employment had to give it up because they were unable to get motor insurance. This is a deplorable situation. It is high time that the Minister dealt with this matter.

The insurance companies apply loadings on insurance cover for young drivers on the basis that this age group predominantly feature in road traffic accidents and have consequent claims. They have produced statistics to prove their case. However, a closer examination will reveal that compared to other EC countries, an exceptionally high proportion of our population is in the under-25 age group. This of course means that in the event of a motor accident the chance of a driver aged under 25 being involved is much greater in this country than in other EC states. We are all aware of the contention of insurance companies that they put a loading on drivers under 25 years of age because they are a high risk category. This high risk is determined on the basis of the number of accidents that have taken place in which that age group were involved. Obviously if a high proportion of the population is in that age group and a high percentage of them are driving cars, it automatically follows that they must be involved in a high proportion of the number of accidents and this would not necessarily relate to bad driving skills.

We must examine the following factors in order to determine the contributory causes of accidents: bad driving, driver error etc., defective cars, cars that would not pass an MOT test, bad roads and numerous black spots, which claim hundreds of lives and result in hundreds of thousands of pounds being spent on medical bills and compensation costs; insufficient implementation of the law in respect of defective and uninsured vehices; exceptionally high legal costs due to the cumbersome system of dealing with claims; and finally the exceptionally high cost of the settlement of claims which are up to nine times higher than in some of the EC states. This is often contributed to by repeated or spurious claims and some people have successfully claimed on up to ten occasions.

Unless these issues are tackled there will be no reduction in insurance premiums and Ireland will not benefit from the liberalisation which should come after 1992. In relation to the number and cost of claims it should be noted that through advertising it has become almost an industry to bring a claim. With due respect to my friends in the legal profession, they are placing advertisements in the media inviting people to consult them if they have tripped or slipped or been involved in a motor accident or any other type of accident in order to ensure that they get their just rights. If they are not successful, no fee will be charged. In country parlance, they are operating on a "no foal, no fee" basis.

There is a huge propensity for increased claims and repeated claims. For some people, repeating claims has almost become an industry. I can fully understand that some people may be unfortunate enough to have two or three accidents but when claims arise repeatedly, perhaps ten or 20 times, one must ask whether these people are accident prone or particularly good at achieving some kind of monetary consideration in respect of these accidents. This applies also to people using the public transport system. Our national transport companies are the ready targets of repeated claims of one kind or another. If somebody slips, falls or trips on a bus, that person goes to a practitioner for medical advice and then gets legal advice. The combination of advice from both sectors leads to a huge claim which is passed on to the transport company and the insurance company.

Another area of concern is the cost of professional advice during the course of cases which may go to court or may be in the process of going to court. The cost of medical or legal advice is duplicated to a great extent and is very expensive. This has been brought to our attention by the media and by private individuals who have explained to us the kind of costs they were faced with when they went to court or achieved a settlement out of court.

We are not suggesting a curtailment in the just claims of people who have suffered an injury and are entitled to some kind of compensation. We are referring to abuses of the system which ultimately are paid for by other people, either by increased insurance costs or by subventions to public transport. Fine Gael propose a number of measures which will, if applied collectively, have the effect of automatically reducing insurance risks and preparing the groundwork to allow young drivers with a clean licence to obtain motor cover for an average car at the rate of approximately £750 per annum. There are those who are sceptical about that. The Minister will probably reply that he has had an interdepartmental committee examining the insurance industry for some months and that they propose to report shortly. I accept that he is acting in good faith but I would point out the necessity to encompass within the scope of the discussions the matters we are bringing to his attention. These points may have been brought to his attention by other people but if not it is important that he should take these issues on board now.

A starter policy costing £750 for young drivers is not beyond the bounds of possibility. Somebody may say that one company attempted to do this a few years ago but found it was not very lucrative. The reason it was not lucrative was that there was little competition in the market-place. Only one company will quote for young drivers and the result is that there is no competition. It is not that this company want a monopoly in that sector but simply that other companies are not interested. The result is the higher premiums are charged.

We propose that all drivers receive off-the-road instruction in a registered driving school, plus a prescribed number of driving hours under controlled conditions as well as a requisite number of driving hours on the road under the guidance of an instructor. One of the first lessons that should be taught to persons receiving instruction is the mechanics of using a motor vehicle. Often people learning to drive do not know what happens by virtue of the manipulation of various instruments. The first thing a person taking flying lessons is taught is exactly how the craft works. If he or she cannot master that, the lessons do not proceed. A good working knowledge of the mechanics of the vehicles is required.

We propose an MOT or certificate of road worthiness for all cars over five years old and stricter application of the law in respect of uninsured vehicles. In relation to the MOT, it is essential to recognise early that in many other countries such a system has been in operation for many years. They have lower insurance premiums, a lower rate of accidents and better driving. They are getting a better insurance deal for their people.

Much has been said about uninsured vehicles. The insurance companies claim that up to £40 million is lost to the industry by way of uninsured vehicles each year. I am not certain about that because I have not seen the evidence. The gardaí back up the claim that there are so many uninsured vehicles. It is virtually impossible for a person to obtain insurance in his or her own name but there is not great difficulty in obtaining insurance in somebody else's name and driving a vehicle which may be part of a commercial fleet. There is an inequality in the applications of the rules and regulations.

We also propose restricted driving for young drivers. If the statistics produced by the insurance companies are correct and if young drivers have a tendency to be involved in accidents, let us give them a trial period of three years after they receive the starter insurance policy. Let them be restricted to driving at 50 mph. They should drive alcohol free and follow the criteria which apply in other countries. If we want to achieve a reduction in insurance costs we must introduce some restrictions. One without the other will not work.

We call on the Minister for the Environment to eliminate as a matter of urgency all accident blackspots. The costs will be recouped by lower and fewer claims for compensation and a reduction in medical and legal costs. I could not overemphasise that aspect of the matter. If one drives from any point here to the furthest extremity one will find at least 20 notified accident blackspots on the roads. Countless others are not identified. A person who is not familiar with a stretch of roadway can readily come upon an accident blackspot without realising it. It is quite usual to come upon a marked blackspot and find that an accident has occurred. Local authorities do not like to identify such accident blackspots in their areas because it gives them a bad name. I admit that the elimination of accident blackspots would cost money but in the case of national primary and national secondary routes it is possible to obtain EC funds to the extent of 75 per cent. We should utilise that facility while it is still available. Every Member can identify locations in his or her constituency where up to ten accidents have taken place involving loss of life and hundreds of thousands of pounds in compensation. I know at least one such location in my constituency of Kildare where 18 lives have been lost in the past 20 years — almost an average of one life per annum. Only at this stage has it been seen fit to eliminate that accident black spot.

I know at least two other locations where a number of people have died as a result of road accidents. When many lives are lost at the same spot emergency measures need to be taken. I can accept that a person not familiar with a stretch of road can make a mistake once or twice but when accidents happen in the same place measures must be taken to eliminate the cause of these accidents.

We propose also to set up a claims commission to eliminate the delays and the high legal and medical costs involved in setting claims. The claims commission would be a speedy way to overcome the difficulty that has arisen in recent times in processing claims through the courts, the duplicated legal and other professional costs that may be involved. This would be a simple system to go through the claims commission initially. Of course, the parties involved would later have recourse to the courts if they want it. I am concerned that we could end up with every argument being taken to the courts.

We call on the Minister for the Environment to appoint sufficient driver testers to eliminate the backlog which makes it virtually impossible for young drivers to obtain a test within a reasonable period. This can and should be readily resolved and I call on the Minister to take the necessary action. I know there are budgetary restraints but we must get our priorities right and deal with the issues that affect most people.

We call on the Government to lift the derogation given to the non-life section of the insurance industry some years ago and thus allow greater competition in the motor insurance area. I encourage insurance companies to give the motorist the benefit of the free market. The Minister may say this derogation was given by a previous Coalition Government. I accept that, but that derogation was given in the circumstances which prevailed at the time and if it were removed it would be of considerable benefit.

Public liability insurance is also an issue here because it is costing hundreds of jobs and millions of pounds in claims, some of which have been repeated up to a dozen times. In the course of this short debate I could not even begin to attempt to address the question of public liability insurance for the simple reason that it is one area where a major scandal exists at present in the sense that people are afraid to seek public liability cover, some small businesses cannot afford it and many people are operating without it. The consequences should be quite clear to all if that is allowed to continue.

The motion before the House is based on a desire to remove one of the most inequitable penalties imposed on our young people. This penalty is much more than a financial imposition. It has implications that affect the way a great many young people live as they prepare themselves for the future. Our motion requests Dáil Éireann to deplore the cost of car insurance particularly for young drivers and goes on to suggest ways in which this can be reversed by political action through an upgrading of driving skills, an improvement in road quality, a more sophisticated system of grading and enforcement and a general review of the way in which costs are incurred and charges are located. It is important for us to realise that this motion recognises more than the cost element of car insurance for young drivers. It also identifies the reasons for and implications of this cost element.

Let us look at the first great anomaly which has surfaced in this area in recent years. We are asking the people who can least afford it to bear the greatest cost. We are telling our young people they are qualified to drive, but they cannot afford to do so, and we are not prepared to do anything about it. Where is the sense in a system which permits a young person of 18 years of age to become a fully fledged, legally qualified driver and then places on him a financial constraint too great to bear thereby preventing him from doing what he is qualified to do? Where is the sense in a system which permits a great many people to drive on our roads who have never passed a driving test but who enjoy the benefits of low cost insurance because they survived the system without having any claims against them?

Statistics relating to young drivers' involvement in road accidents are constantly used by those who argue in favour of loading young drivers' premiums, but are there any statistics to show the percentages of drivers involved in accidents each year who have never passed a test? I feel sure we all know some drivers who survive on the roads not because of any skill on their part but rather because of the skills of those around them. On one hand, you have non-tested drivers who form a significant proportion of the driving population but are not a recognised category of driver, and on the other, you have young drivers who have been granted a certificate of competence by the Department of the Environment but who all too often cannot exercise the right that certificate gives them because of the financial constraints imposed on them by the insurance premiums. This is ironic. What are the implications of this extraordinary situation for the young driver of today?

Let me quote the example of one young person in my constituency, the unwilling victim of the circumstances in which so many young people find themselves. This young man is 20 years of age and the holder of a valid driving licence. He has already worked for three years with a commercial concern which included driving for them. Recently he decided to put to good use the skills he learned by setting up his own firm. To do so he needed to insure a car which would be an integral part of his daily activities and without which he simply could not manage his affairs. The cost quoted to this 20 year old was a staggering £2,400 for straightforward, third party, fire and theft. Needless to remark, he is now a much chastened young man who has had to put his plans and ambitions very firmly to one side for several years. Where is the justice or the fair play in a system which allows this to happen? If he cannot now afford to pay this insurance at what point will he be recognised as a safe risk by an insurance company? Suppose he were content to hold on to his licence until he reaches some arbitrary age, would he then be considered a safe risk even though he may drive only on the odd occasion provided, of course, he can persuade a financially better off relative to include him on his policy? Those are some of the existing anomalies. To suggest that the answer to the problem of high cost insurance lies solely with the insurance industry is to be unaware of the overall implications of the problem.

Our motion seeks to have all the various strands linked together so that an equitable outcome will result, but the insurance industry undoubtedly have a part to play. They must be seen to be weighing all the factors involved. They must put before their customers the statistics on which the cost imbalances are based. We must have more information on the various categories of drivers who are at risk and are paying the piper who plays a very erratic tune. For example, is it right to penalise all drivers because of an arbitrary age limit? Does skill not have a part to play? Does one's adherence to the laws of driving and the consumption of alcohol not have a bearing on the whole question?

This motion recognises these factors and, more importantly, seeks to do something about them. Young people have no defined right to special treatment, but they have a right to be treated fairly and equitably. One of the most important aspects of this motion is the question of better driving skills. It is an acknowledged fact that one of the reasons for the loading of premiums on young drivers is their lack of experience, but this creates a catch-22 situation: you cannot get experience without driving and you cannot drive without insurance and you cannot get insurance at an affordable cost without experience. This is why we are proposing a revaluation of the requirements on drivers at the provisional licence stage.

We are advocating a system of restrictions in the early years of a driver's life, thereby encouraging a demand for greater skill levels. Of course, this would be contingent on the insurance industry's recognition of the need for a greater spread of responsibility for starter drivers and the need to have a more detailed breakdown of risk groupings. There are excellent young drivers and it is our responsibility to do all in our power to encourage many more young people to improve their driving standards so that the load can be shared more evenly. This motion embodies many of the things necessary to bring about this situation.

One of the great dangers inherent in the present state of affairs is that people may feel justified in driving without proper cover or without cover at all. The consequences of this do not need to be emphasised. It may not be possible to quantify the numbers of uninsured drivers in the country at any given time but there is ample evidence to suggest that there are significant numbers using our public roads. The presence of uninsured drivers is to be deplored but more importantly the reasons for it must be recognised.

One of the major factors in the cost of insurance is the impact which the cost of claims has on the whole area. There are a number of factors involved here which need to be examined and which require the goodwill and expertise of all the different related sectors. We need to exert tighter control on the cost of claims even if it requires a radical overhaul of the present system. We are proposing that a quantum of damages be introduced to control and standardise the cost of claims. It is a weakness in the present system that the criteria for assessing claims are too loosely based and too much dependent on the subjective judgment. We are saying that objective standards are essential. Allied to this is the need for a critical overhaul of the system for analysis of claims with a view to eliminating spurious or fraudulent claims. We have arrived at a point where there is a tacit acceptance of claims at a certain level. A proportion of claims are tolerated and accepted as a soft option rather than going through a complex and time consuming judicial system. This has encouraged an approach which is not in the best interest of everybody concerned. We need a fresh look at this whole area. We also advocate that the insurance company recognise the major role they have to play in providing statistical data which will enable the identification of problems in different areas and the reasons for resultant heavy loadings. It is in the best interests of the insurance industry itself to take this initiative.

Another aspect of the high cost of cover which has recently been brought to my attention is that many young people feel they have no alternative but to accept the high cost of first-time cover and are then forced to borrow money to pay for it. This is one of the hidden impositions of the story and is an unfortunate consequence to be borne by the driver who would ordinarily have enough to cope with in raising the finance for the vehicle itself. In essence what this motion seeks to achieve is an awareness, first of all, of the problem itself and, secondly, of the need for an input to a solution from all the interested parties. It is not an Irish problem, indeed, it is common to most developed countries but it does have an Irish dimension since general claim costs are so high here that our young drivers have serious problems with affordable insurance.

The points which we have put forward in this motion are substantiated by the contents of a recent OECD report in which it is recognised that there are a number of features which militate against a reduction in the current costs. Principal amongst these is an inadequate level of driving instruction, a point which we are strongly making in our submission. The report stresses the part which the use of alcohol plays in the standard of driving, and again this is in line with our thinking. The report also points out that Ireland and other countries have not yet started an integrated road safety policy geared to young drivers and that there is a lack of data generally on the mobility of young drivers. We have the opportunity, therefore, of being in the vanguard of the move in recognising the problem, of dissecting it into various components and of coming up with a long term policy which will bring about a major improvement. This motion can provide the groundwork for such a move and should be accepted by the Minister and the House.

I support the motion put forward by my colleague, Deputy Durkan. Many Deputies have spoken in this House about the problem of car insurance and the high cost of it during the last year or two and many Government Ministers have told us what they would do about the problem. However, at the end of the day we have heard that the Minister has set up an interdepartmental committee involving himself and the Minister for the Environment which was to report about a month ago but which I now understand will not report for another two months. In the meantime young drivers must suffer because they are not able to get quotations from insurance companies.

(Wexford): We have to get it right.

That is simply not good enough.

(Wexford): We are trying to do something for them.

Wexford people as well as Kilkenny people know all about the high cost of insurance cover. There are young people in Wexford as well as in Kilkenny who are going to insurance brokers who tell them they can do nothing for them. The reason the motorist continues to have high motor insurance is that the Government refuse to allow competition from Europe or to take action that would reduce costs in relation to claims. This situation does not have to continue in this way if the Government have the political will to implement the same regime that pertains in the UK or in Europe. It is no exaggeration to say that motorists are punch-drunk from the rising costs of insurance. Indeed, in the last year there have been four increases from most insurance companies. I regret to say that yesterday another insurance company, Guardian Royal Exchange, have indicated that they are increasing commercial vehicle insurance rates by a further 10 per cent and at the same time are reducing to three months a concession given to motorists whereby they could keep their vehicles off the road for two years and still hold their no claims bonus. This is simply disgraceful.

Ireland has the most expensive insurance regime and the second most expensive location for motor cars in Europe. All the Government are seeking is more and more derogation to protect insurance companies rather than the consumer, so that at the end of the day insurance premiums remain high. There is agreement and collusion within the insurance industry to get young drivers off the road because they are deemed to be high risk, particularly those with provisional licences. They even refuse them a quotation for general insurance terms.

I take this opportunity to implore the Minister for Industry and Commerce, Deputy O'Malley, to intervene with the insurance industry so that all companies accept a share of the young driver market. Nobody should have to pay more than £750 for third party insurance which in itself is high enough but it is much lower than many of the quotations being made by a small number of companies who are quoting at present. Young people should not be singled out for discrimination by insurance companies. It is time the Government told companies in the strongest possible terms, that there are obligations and responsibilities to be met to young drivers. As I have stated, the Government have talked about the problem long enough but have achieved nothing for the hard pressed young motorist and the hard pressed consumer in relation to motor insurance.

I would have thought that it is scarcely the best use of Dáil time that we should this evening be rehearsing this subject yet again, as the cost of motor insurance, and in particular the cost to young drivers, has been debated here on numerous occasions over recent months at Question Time——

And rightly so.

——and indeed as recently as 22 May in the Seanad——

Why not?

——and on 13 June last in this House during Adjournment debates.

And rightly so.

It has been pointed out on these occasions that both the Government and myself are very fully aware of the difficulties being experienced by motorists at present and in particular the problems being faced by young drivers, and the Ministers concerned have been extremely active in seeking ways of improving matters. All parties are concerned at the high cost of motor insurance. I will repeat myself once again and say that an interministerial group, comprising the Ministers for Justice, the Environment, the Attorney General and myself are at present examining ways and means of improving the environment for motor insurance. This group are focusing on strict and sustained enforcement of existing road traffic legislation, on amendments to the Road Traffic Acts designed to reduce the motor accident rate, on suggestions to improve the cost and availability of motor insurance and improvements or alternatives to the courts system for the resolution of personal injury claims.

This group have available to it the full resources and experience of all the Departments of State concerned with this area. They have had close consultation with the Irish Insurance Federation and have considered every aspect of the matter in considerable detail. So intensive has been the examination of the problem which this group have carried out that I cannot see what possible benefit would derive from the setting up of a Commission of Inquiry as advocated by the amendment to this motion. Such investigations for example, the O'Connor report in 1972, the O'Donoghue report in 1976 and the Prices Advisory report in 1982, have not led to the discovery of anything startlingly fresh. Indeed, what is needed now is action not the creation of a situation that would require awaiting the outcome of some future further investigation. I believe, given the progress made in the deliberations of the interministerial group, that such action will be taken speedily and, consequently, I cannot commend the establishment of a commission of inquiry to the House.

The Ministers with responsibility for the areas concerned have already announced a number of measures being considered by this group. Recently published Fine Gael proposals appear to be nothing more than a regurgitation of some old ideas and the taking on board of what has already been announced by Ministers. There is little in their document which has not already been put forward and debated and any claim that all or any of these ideas are novel and theirs is spurious.

The Fine Gael policy document suggests that insurers should introduce a policy for starter drivers which would cap the premium at £750. Approximately three years ago one insurance company introduced such a special young driver's policy which capped their premium at £800 per annum. However, following a very bad claims experience which the company sustained the company had, I am advised, no option but to significantly increase premiums. I do not believe this House — or any Minister — should try to dictate the level of premium required to meet specific risks, this is a commercial judgment best left to practitioners. I would point out based on previous experience that, if this cover were made available at the rate suggested by Fine Gael, someone else would have to pay for it, the more mature motorists. The problem of high insurance costs is not just confined to young drivers. For example, there are many mature drivers on low incomes who are having difficulty in meeting their present premiums and it would be unfair to further penalise them.

The price of insurance, including motor insurance, here — as indeed in any other market — is directly and substantially dependent on the frequency of claims and the cost of settling those claims. In 1988 insurers sustained underwriting losses of £48 million on their motor portfolios; the corresponding figure for 1989 was £116 million and losses for 1990 are expected to be similar to the 1989 figure. Confronted with losses of this magnitude and in order to maintain their viability, insurers have considered it necessary to increase their premiums in line with their claims experience and-or to exercise more selectivity in the type of risk undertaken.

The fundamental cause of high insurance prices for consumers is the high claims rate allied to the high cost of individual claims. These factors bear on the level of insurance premia quoted to young drivers as well as those quoted to more mature motorists. Insurers may legitimately require certain categories of business which represent a higher than average level of risk to pay higher premiums, to adequately reflect the claims experience of such risks. The Government are aware that when an insurance company quotes in respect of motor risks for young people the premiums may be regarded — and frequently are — by those concerned as excessive. The cost of motor insurance for young drivers, however, tends to reflect the claims experience of motor insurers. While one sympathises with the situation in which young drivers find themselves, statistical evidence has shown that they are more likely to be involved in accidents and, therefore, to cause claims. The cost of these claims can only be met by insurers if a realistic premium is forthcoming to cover the risk involved.

I should like to draw some of the statistics to the attention of the House. While young policy holders account for only 15 per cent of the total number of policies issued by insurers, young drivers account for 36 per cent of all claims. The average cost of claims caused by young drivers is more than 40 per cent higher than the cost of claims arising from more mature drivers. In 1989, the latest year for which full figures are available, 3,732 car or motorcycle drivers were killed or injured in road traffic accidents, of which 1,061 or 28 per cent were aged 24 or under and 2,119 or 57 per cent were aged 34 or under. Similarly, of the 2,940 car drivers killed or injured in 1989 in road traffic accidents, 568 or 19 per cent were aged 24 or under and 1,437 or 49 per cent were aged 34 or under. These figures clearly demonstrate the disproportionately high level of accidents involving young drivers. Indeed, specific research carried out by the Motor Insurance Advisory Board in recent years suggests that the loadings applied in Ireland for age of driver are not out of line with the identified level of risk.

This House may be aware that a formal common position was adopted by the European Community Council of Ministers under the Irish Presidency on 20 June 1990 on the EC Directive on Freedom of Services for Motor Insurance, which is due to be implemented by all member states before 20 November 1992. Since this directive has not yet come in the suggestions made that the use of derogations in its implementation here was causing a lack of competition is untrue as the directive cannot come into force until November 1992. The underlying principle of that directive is the creation of greater competition in the areas of policy conditions and premium rates and that the general availability of insurance should improve overall. While it is hoped that the opening up of the Community market will intensify competition, it should be noted that there is already a massive foreign presence in the Irish motor insurance market. Over 80 per cent of non-life insurance undertakings operating in Ireland are foreign owned.

Increased competition will not automatically lead to a reduction in insurance costs in Ireland. Prudent insurers, indigenous, foreign established or foreign services must set their premium rates to match the compensation pay-out. The compensation levels existing in each member state should determine the premium rates charged by both established and services insurers. The implementation of the Motor Insurance Freedom of Services Directive should help to emphasise the role of the policy holder and the claims atmosphere of the country concerned in determining the premium paid and minimise any misconceptions about "foreign" and "home" motor insurers in this regard.

The suggestion of insurers implementing tighter controls on claims is not new. I focused attention on this matter a long time ago. Indeed, as far back as January 1990, at the annual dinner of the Insurance Institute of Cork, I spoke about claims control on the following lines:

An ominous development in the non-life insurance area generally is the suggestion that there is an escalating problem in this country in the number of spurious claims. The insurance industry for example in referring to the specific area of "whiplash" injuries has indicated that there is firm evidence that the incidence of claims for such injuries in Ireland is significantly in excess of UK levels. Claims of this nature must be eliminated and efforts are needed from all parties to highlight and end any ambivalence in respect of such practices which might be present in the public mind. I sometimes get the impression that some people adopt a "hear no evil, see no evil" approach and ignore the fact that such an approach may be one of the reasons their insurance premium is not lower. This myopic and insular view is damaging and stupid and at the end of the day results in a real cost to the average insurance consumer. From the insurer's viewpoint greater use of information technology has obvious advantages in tackling the problem of dubious and spurious claims.

I was glad to read in the newspapers recently in regard to spurious claims that a huge series — 15 I think — carried out by one individual over a period of eight years was at long last unearthed. The judge made appropriate comments in dismissing the case. I am glad that the case got a good deal of publicity because it might serve as a warning to many others engaged in equally fraudulent practices in relation to the consequences if they are caught.

I was also pleased to learn recently that a magnetic resonance imaging scanner, which can help to detect if accident insurance claims are bogus, is in operation at present in a Dublin hospital. This scanner acts as a sort of "lie detector" preventing spurious claims arising from accidents. This type of scanner is a further help in detecting such claims and I understand that other hospitals are seeking funding to enable them instal such equipment.

Following discussions between my officials and the insurance industry, motor insurers have established a collective and computerised data bank to assist in the detection and stamping out of fraudulent or dubious claims.

I will deal later with the specific proposals which are being considered by the group in an effort to improve the insurance environment. However, I must dwell for a short time on my role as Minister for Industry and Commerce in relation to insurance and on the problems facing the insurance market in the State. It must be emphasised that the basic role of the Minister laid down both by national and Community law is one of supervision of insurers in order to ensure that insurance companies meet their statutory solvency and reserve requirements. It is not my function to tell insurers how to run their business or to interfere with their rights to accept or reject risks, or dictate the terms applicable to any insurance policy, or to interfere in their rights to charge realistic premiums in the light of their underwriting experience.

However, insurers do have certain duties. These duties lie in co-operating in the measures taken by the State and the community without undue selectivity in the acceptance of risks. I am confident that as in the past they supported the road safety campaign, the support of the industry will be forthcoming. It is a further concern that insurance should be provided efficiently and at a reasonable cost.

The cost of insurance cover has been increasing steeply recently. Many of the influencing factors are undoubtedly outside the direct control of insurers. In 1989, motor insurance claims costs are estimated to have risen by £28 million over 1988 as a result of increased claims frequency alone and by a further £40 million over 1988 on foot of a rise in the average cost of individual claims alone. Thus, the conclusion has to be reached that recent increases in motor insurance premia are due to increases in the claims frequency and the average cost of individual claims, that is the quantum of compensation. However, I expect insurance companies to control those factors within their ambit so that inefficiencies in the insurance sector do not give rise to any unnecessary costs which have to be borne by the community as a whole.

Insurers are subject to very stringent supervision rules and are required to maintain various categories of reserves in respect of outstanding claims, that is those which have been received but not yet settled, and claims which have arisen but not yet notified. The insurer must use the premium income to cover administration overheads and to meet due payments on claims. The balance of the premium income received in any year represents the underwriting profit or loss. In addition to these requirements each company is also obliged to maintain solvency margins. Insurance companies are therefore, subject to much more stringent financial control and supervision than is the case with commercial enterprises in general.

Consumers, of course, are more interested not in the supervisory aspects of insurance, except when a crisis arises but the issues of cost and availability of insurance, particularly motor insurance. I recognise, as I have said previously, that there are serious concerns in this area. We should, however be aware that increasing claims consciousness and a more litigious environment have a direct adverse effect on insurance costs. The greater inclination of many citizens to claim their full rights and entitlements to compensation under the law has meant that many more claims are made nowadays in respect of events which ten to 20 years ago would not have attracted a request for compensation. Undoubtedly citizens value these rights and would resist efforts to curtail their exercise, but they have a cost.

The cost of compensation in Ireland is abnormally high and has been so for far too long. In 1989 motor insurers paid out £320 million approximately in compensation costs. This gives some indication as to why insurance premia are seen as a burden. In principle, Irish society as a whole has two options with regard to insurance. We can accept the high levels of risks that exist at present and which arise from lack of care for safety, and this can only result in high prices for insurance, or we can reduce the level of risk which in turn should see significant improvements with regard to the price and the availability of insurance cover, and this is the course of action I hope we will take. There are two other options in regard to insurance, first that we should continue to have the highest level of compensation in Europe and perhaps the highest premia in Europe or we should have a normal level of compensation and normal levels of premia. I hope that this society, on reflection, would choose the latter rather than the former. Up to now we seem, as a society, to have voted for the former.

I was glad to read recently in an editorial in Business and Finance of 27 June 1991 a balanced approach to the subject of insurance. I would commend that article to all Members of the House. It set out the reasons insurance costs are so high in Ireland rather than just complaining about the high cost and ignoring the causes, which is usually what we hear in debates on insurance. I quote from that magazine:

Claimants have not been the only beneficiaries. The compensation boom has also thrown a lifeline to the rapidly expanding legal profession. Over the last 15 years the number of solicitors practising in this country has more than doubled, from 1,500 to 3,500. What do all these do for a living? On the available evidence many of them are living on the "compo" culture.

I am aware that certain members of the legal profession are advertising their wares concerning the consumer's right to compensation. This is little more than an encouragement to people to submit claims in circumstances where they would not otherwise have done so. I would urge the Incorporated Law Society to look into this matter and to discourage the type of advertising which almost incites people to bring claims. I have no objection to normal advertising where a firm makes available its name and address and so on. I hope when considering that matter the Incorporated Law Society will also avail of the opportunity to consider the practice, which I am advised is now widespread, of charging a percentage of the damages to the client concerned. That cannot but have the effect of increasing compensation. If the client realises he will have to pay a percentage of his damages to his own solicitor he has no option but to look for more than he might otherwise have settled for.

The inter-ministerial group established late last year has met on five occasions. Its brief is to ensure that action is proposed and taken by the appropriate Departments of State, which would be designed to improve the overall environment for motor insurance. The group reports directly to Government. Among the measures being proposed are strict and sustained enforcement of road traffic laws. Ministerial responsibility for the enforcement of road traffic legislation, via the Garda, rests with the Minister for Justice. The Garda authorities have confirmed that traffic law enforcement is continuing to be a high priority for the force in 1991. In particular, the force will be targeting breaches of drink driving laws and continuing the momentum generated during the anti-drink driving campaign in December 1990 which was particularly successful and for which the Garda and the Minister for Justice are entitled to our thanks and our congratulations. Increased resources in terms of gardaí and equipment have been provided for the road traffic corps.

The results of this continued enforcement are beginning to show benefits in terms of saving lives. There was a significant reduction in road accidents in the first quarter of 1991. Fatalities declined by 25 per cent, 90 compared to 122 in the same period in 1990, and injuries declined by 13 per cent as against the same period in 1990. However, at this early stage it would be imprudent to draw any definite long term conclusions from this.

Ministerial responsibility for road traffic legislation rests with the Minister for the Environment. It is his intention to propose a road traffic and licensing Bill for early consideration by the House. This Bill will provide for an increase in the minimum disqualification period for those convicted of dangerous or drunk driving from one year to two years. In addition, those convicted will be required to repeat the driving test before they can go back on the road even after the two year period is up. The Bill may make provision for the impounding of uninsured vehicles as well as introduce a mandatory disqualification period for those convicted of uninsured driving.

The Department of the Environment estimate that the threat of impounding uninsured vehicles, together with increases in the conventional penalties imposed on uninsured drivers, should result in a reduction of up to 50 per cent in the rate of uninsured driving and should result in approximately 42,000 extra vehicles being brought into the insurance system and contributing towards meeting the cost of claims arising from accidents.

The Department of the Environment are proposing the setting up of a register of driving instructors. That Department are involving the driving schools and the Irish Insurance Federation in the formulation and adoption of satisfactory standards for driving schools, to which standards registered driving schools will be required to adhere. It is important that very strict criteria must be set for the scheme and that tuition standards be agreed for the programme between Government, insurers and driving instructors. If an acceptable scheme can be agreed, the insurance industry will consider offering a discount to young or inexperienced drivers who have taken a minimum number of driving lessons from approved instructors. In regard to the question of driver testers, which Deputy Durkan complained about, I might add that the number of such testers was increased earlier this year from 44 to 83. As a result, the backlog of tests is being reduced rapidly.

The National Safety Council launched a road safety awareness plan in March 1991 which included a publicity campaign, to the funding of which the Irish Insurance Federation have contributed £250,000 in addition to the considerable financing which the federation already provides annually to the National Safety Council.

In addition, the Environmental Research Unit of the Department of the Environment are carrying out a survey on attitudes to road safety issues, use of seat belts, scale of drink-driving problems and observance of speed limits.

An analysis of statistics received from both the Irish Insurance Federation and the Department of Justice on awards made in personal injury cases reinforces the conclusion that the most appropriate basis for proposing improvements to the operations of the courts and fundamental alterations to the courts as a mechanism for resolving personal injury cases lies elsewhere than within the framework of the Courts Act, 1988. It is not that the Courts Act, 1988, has failed in its objective but, rather, that if there are to be significant and immediate reductions in the level of personal injury compensation and a less expensive way of settling claims then initiatives which go beyond the objectives of the Courts Act, 1988, are required.

Ministerial responsibility for the courts rests with the Minister for Justice. It is his intention to propose a courts and court officers Bill for early consideration by the House. The Bill will contain a number of provisions which will be of importance to the objective of improving the environment for insurance. For example, it will propose the establishment of a court of civil appeal with a very limited right of further appeal to the High Court in personal injury actions. Secondly, it will propose an extension to the powers of the Taxing Master in an effort to reintroduce a degree of control on legal costs in personal injury actions, which have gone out of all proportion in recent years. Thirdly, it will propose the giving of power to the Master of the High Court for the introduction of pre-trial procedures.

At the request of the Interministerial steering group, the Bar Council, the Incorporated Law Society and the Irish Insurance Federation met as a joint working group to examine proposals for some form of arbitration which could be explored as an option for the purposes of reducing the costs of personal injury actions and also to consider any proposals which the members of the joint working group might have that could have the effect of generating a similar reduction and an overall increase in cost effectiveness.

The joint working party of those three organisations submitted an interim report which recommends certain specific changes to procedures in personal injury cases to be implemented by way of changes to the rules of court; identifies areas for further examination and envisages a further report from the joint working group, and concludes that it would be premature to introduce an arbitration arrangement pending the implementation of the recommendations on procedural changes and experience of the operation of these changes.

The interministerial steering group are awaiting a further report from the joint working party.

The Minister for Justice has agreed that his Department would carry out a review of the levels and nature of personal injury compensation in Ireland in the light of a recent survey by Davies Arnold Cooper which suggests that personal injury compensation levels in Ireland are substantially higher than in other EC member states and a report which the Irish Insurance Federation is commissioning from Coopers and Lybrand on personal injury compensation levels in ireland compared to the UK.

In order to provide data which would enable the monitoring of personal injury claims costs on an ongoing basis, a format for the supply of such data is being finalised by the IIF and my Department. Such data will be useful in monitoring the impact of the initiatives to improve the environment for insurance on insurers' claims costs.

Other measures also under consideration by the interministerial group include a reduction in the blood alcohol level, hospital sampling of blood or urine post accident and a remedial programme for accident blackspots on roads.

These are only some of the measures being considered, and I hope the group will be in a position to announce the full package of measures shortly as the report has now been completed and a draft submitted to members, and that these can be implemented in the very early future once they have been agreed by Government. I would add, however, that Government action of itself will not reduce or stabilise motor insurance costs. Consumers must play their part by increased awareness of the need for safety.

In conclusion, for all the reasons I have enumerated, I do not consider it would be appropriate or useful to institute a commission of inquiry into the motor insurance industry, and Members should reflect carefully on the disruption of business and the costs which arise in servicing such inquiries before lending their support to calls for the setting up of it.

I move the following amendment:

To delete all words after "Dáil Éireann." and insert the following:

"concerned at the cost and availability of motor insurance, calls on the Minister for Industry and Commerce to institute a commission of inquiry into the motor insurance industry.

As the Minister said, there may have been inquiries over the years and nothing startlingly fresh arose from them. Perhaps an inquiry at this stage, having regard to the problems facing the consumers — those who require insurance at a reasonable and affordable level — would be more fruitful and address its mind to the needs of consumers.

The Minister said that what is needed now is action and I could not agree more. We certainly need action but from what the Minister said I do not foresee any action in the short or medium term. It has to be remembered that insurance companies are not voluntary bodies or charitable organisations. They are business companies that are quoted on the Stock Exchange and have a single objective, profit, to make the maximum amount of profit for themselves and their very wealthy shareholders. They are not in the business of providing a service or having any great public spirited feeling towards consumers who are compelled to avail of their service.

The Minister said that perhaps the highest level of compensation in the world is paid in Ireland. Quite frankly, I disagree with that suggestion. At the end of the day the compensation paid in Ireland is set by the judges in our courts, the District Court, the Circuit Court, the High Court and, ultimately, the Supreme Court. I have watched the figures they have awarded over the years after examination of the evidence and, in my opinion, broadly speaking, the compensation awards are fair, neither too little nor too much. There may be cases on occasions when a judge over-reaches himself and awards too much or underestimates the figure and awards too little. In some of those cases appeals take place to a higher court where any mistake is corrected. That is what appeal courts are for. Broadly speaking, the awards are fair and appropriate having regard to the injuries sustained by a particular claimant.

The courts in Ireland do not dispense money willy-nilly or throw out money that is not fairly or reasonably warranted by the case coming before them. In my experience the judges examine each claimant very carefully and meticulously. They hear about the injuries; they hear evidence from doctors; assess the person in the witness box and make their awards. The judges are people of great skill and long experience in these matters and, as I have said, their awards are just and fair. They compare fairly well with awards granted in other countries. In some countries, like the United States, awards are very high indeed, way above the Irish level. However, on a European basis, comparing like with like, injury for injury, loss for loss, they compare very favourably with other countries and I would strongly disagree with any other suggestion.

The insurance companies are among the greatest group of whingers and complainers ever to hit the scene in this country where multinational companies go. They are always whingeing and complaining that their profits are not high enough or that they have this complaint or that complaint. We must face the fact that they are a very powerful lobby indeed. They exercise tremendous clout and possess tremendous wealth. They also generate enormous profits not just for motor insurance. They are in a far wider range of activity than just motor insurance. They make profits hand over fist.

Of course, there is a risk element to the insurance business and anybody who sets up as an insurance company has to be prepared to take that risk. Anybody going to the racecourse and putting money on a horse takes a risk and must be prepared to back losers as well as winners. As the saying goes, you cannot win them all. However, of all the bad losers the insurance companies certainly take the biscuit. We heard an interesting example of that recently in the UK with Lloyds, one of the wealthiest, most prestigious organisations going back hundreds of years, making hundreds of millions of pounds over the years whose members are among the weathiest people not only in Britain but in other countries. They have some members from this country, who put up a minimum of £100,000 — perhaps it is more — to become a member, and they have drawn substantial profits over the years. Things go a little sour for them in one year, but do they take that in their stride and say they must take the bad with the good? Not at all. They put up a whinge, a moan and a complaint that taxpayers' funds have to be used to bail them out in the year things went wrong for them.

That is the insurance company response to the business world. They say they have to make their profits in life insurance, in household insurance, in public liability insurance, in factory insurance and in motor insurance. They have to make their profits in every single field. They make their profits, broadly speaking. Go into any of their offices and look at their buildings; look at their reserves; look at their resources. They have hundreds of millions of pounds. They are among the wealthiest institutions in this country, and in every country where they operate. We do not have to concern ourselves unduly about them.

They set up a lobby in this country to have juries abolished. They campaigned for that and they persuaded Deputies, Ministers and Governments, the media, business and finance and all the rest of them that if only we abolished juries all would be well. The Insurance Federation promised that if juries were abolished premiums would come down. That is on the record. They said the juries were the cause of all the trouble, that judges alone would be fine, that there experience showed that. If we would only get rid of the juries all would be well.

What did we do? We bowed to that argument. We said that if that was what the insurance lobby wanted we would do it in the teeth of a lot of opposition from consumer interests and from legal interests who tried to point out, and who protested in vain, that it would not have that effect at all. What happened? It did not have the effect they said it would and, far from coming down, premiums have gone up and continue to go up.

Much play has been made about costs of lawyers, and the Minister's attitude to lawyers has been known over many a long year. Is no blame to be put on the insurance companies for the way they conduct their business where claims are concerned? There is not a word of criticism. I now have a few things to say about insurance companies and how they attend to their own business of dealing with claims. To a massive extent, they contribute to their own problems and to their own costs. They throw away millions of pounds year in year out because they tackle the issue of claims in a very inefficient manner.

Let me deal with one aspect of the matter. Let anyone pick up the "Legal Diary" and look at the list of cases waiting to be tried, for example, in the High Court. There are columns and columns of them. At what level would you suppose most cases get settled? Is it within a month or two of the accident? Is it within six months of the accident? Is it after the writ is issued? Is it after the statement of claim is filed? Is it after a notice of trial is issued or is it waiting there sitting in the list for a year or 18 months to reach its term? No. The overwhelming bulk of cases are settled at the doorstep of the court and any practising lawyer will tell you that. The point at which the insurance companies choose to settle is the highest point in the cost factors that make up running down actions in our courts. They wait until the biggest possible amount of legal costs have been incurred before they demean themselves to be prepared to settle. At that stage, on standby at great expense of perhaps £200 or £300 a day are a couple of orthopaedic surgeons, a couple of GPs, engineers on both sides, barristers, solicitors, photographers and all the rest of the family, all brought there that day prepared to go on with the case, and it is at that point that the insurance company say, let us see if we can settle the matter now.

Debate adjourned.
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